The Fickle Finger of Fraud

By | 2017-07-17T12:21:27+00:00 March 28th, 2017|Global Market Update|

How do you smell a rat? Charles Ponzi, author of the first Ponzi scheme. Source: Boston Public Library Detecting financial fraud can be challenging. We know there are lots of people who want our money. It takes decades, sometimes a lifetime, to build a nest egg. It’s important to safeguard it. But in the real world people lie, cheat, and steal. Financial products are especially prone to distortion and deception, with complex legal provisions and mind-bending mathematical formulas. How can we protect ourselves? First, [...]

Truth-Telling and Fools

By | 2017-07-17T12:21:42+00:00 September 29th, 2016|Global Market Update|

Who tells you the truth? King Lear and his Fool. Artist: Ary Scheffer. Source: Folger Library No one wants to hear bad news. That’s why accountants and finance professionals are often so unpopular. A leader may have grand visions for the future filled with growth and opportunity—but his finance people tell him he doesn’t have the money to pay for it. Good leaders listen to counsel; bad leaders shoot the messenger, surrounding themselves with toadies and sycophants. Eventually, these leaders overreach. They try to [...]

The Tyranny of Norms

By | 2017-07-17T12:21:46+00:00 August 24th, 2016|Global Market Update|

Will the economy ever get back to normal? Source: New York Fed Fed officials keep telling us what they want. But that’s not their job. The Fed was established to support the banking system—to serve as bankers to the bankers. Part of that job involves managing bank reserves, the money supply, and short-term interest rates. The 1978 Humphrey-Hawkins legislation specifically instructed the Fed to pursue two goals: full employment and price stability. This is sometimes called the Fed’s “dual mandate.” So it is understandable [...]

The Biased Investor (Part 5)

By | 2017-07-17T12:21:56+00:00 June 7th, 2016|Global Market Update|

What does it mean to be rational? Illustration: Friedrich Blitz. Source: Wikipedia We need to make decisions every day about all kinds of things: what to eat, what to wear, how to answer the latest question from family members or co-workers or clients. Sometimes, we have time to think things through. Often, however, we don’t have that luxury—so we develop shortcuts, rules-of-thumb, that help us decide what to do pretty quickly. For example, the weather is pretty stable. If slacks and a long-sleeve shirt [...]

The Wisdom of Fools

By | 2017-07-17T12:21:59+00:00 May 2nd, 2016|Global Market Update|

Who tells you the truth? Stanczyk by Jan Matejko. Source: Warsaw National Art Museum There’s a tragic cycle in human affairs. A leader solves a problem and is celebrated for their wisdom or decisiveness or practical understanding. They’re given more and more authority. Eventually, all the adulation goes to their head. They don’t want to hear bad news—who does?—and acquire toadies and sycophants who only tell them what they want to hear. Eventually, the leader overreaches—they try to accomplish things beyond their abilities and [...]

By Any Other Name …

By | 2017-07-17T12:22:05+00:00 April 11th, 2016|Global Market Update|

Do names matter? Photo: Laitche. Source: Wikimedia In Romeo and Juliet,Juliet famously questions if a rose would smell just as sweet if we called it something else. And the answer to that is, both yes and no. The fragrance would be the same, of course. But the “sweetness”? That’s purely subjective. It’s based on our experience and expectations, as well as what we might compare it to. In “The Hunger Games” the villain -- President Snow -- always wears a rose, and he uses [...]

Investment Management / Self Management

By | 2017-07-17T12:22:18+00:00 December 30th, 2015|Global Market Update|

Do our emotions work against us? Source: Wikipedia They can with investing. Our own fears or doubts or arrogance get in the way. For example, most of us are afraid of losses: the pain of losing money is a lot worse than the regret we might feel by missing out in an up market. So we leave our money in safe, low-interest bank deposits rather than risk it in a volatile market, even though we know inflation is eating it away. On the other [...]

Interest Rates, Janet Yellen, and The Bard

By | 2017-07-17T12:22:19+00:00 December 17th, 2015|Global Market Update|

What did the Fed just do? Narrowly considered, the Fed simply changed the wording in their periodic statement, announcing that the range for inter-bank interest rates—Fed Funds—would go from zero to .25% to .25% to .5%. In other words, the rate will move from “essentially zero” to “almost zero.” Practically, if a bank borrows $1mm from another bank overnight, they’ll have to pay $13.89 rather than $6.94. You could almost call this the “Macbeth” interest rate move: full of sound and fury, signifying—nothing. But [...]

A Dividend Polaris

By | 2017-07-17T12:22:47+00:00 May 20th, 2015|Global Market Update|

Why do dividends matter? Photo: Ashley Dace. Source: Wikipedia Dividends have become quite popular in recent years. With interest rates so low, many income-oriented investors have used dividend-paying stocks as substitutes for bonds in their portfolios. And dividends have a lot to recommend them. They usually pay cash quarterly, they can grow with inflation, and taxable investors may owe less to the government if the dividends are qualified. […]

Robot Dreams

By | 2017-07-17T12:23:01+00:00 March 12th, 2015|Global Market Update|

What is a robo-advisor? Source: Wikipedia Robo-advisors are web-based financial applications that offer to make investing easy, inexpensive, and even fun. They start with an online questionnaire, apply one of several asset-allocation models, and offer index-based buy-and-hold portfolios using low-cost Exchange Traded Funds. They also rebalance the portfolio periodically, and can sometimes do tax-loss harvesting. Their fees are low, and they’re fully transparent. What’s not to like? […]